Moderne Ventures Nets $230 Million Betting Corporate Connections Offer Leg Up

Moderne Ventures has raised roughly $230 million for its third fund, tapping investors in part on the thesis that relationships with companies in the real-estate industry give the firm a leg up in spotting promising technology. 

Chicago-based Moderne targets seed- to Series B-stage deals with a particular specialty in backing startups in real-estate and related sectors such as finance and insurance. Roughly 30% of investors in Moderne’s new MV Core Fund III are companies in the real-estate sector or related industries, giving the firm insight into problems the industry seeks to tackle and potential customers for its portfolio companies, said founder and managing partner Constance Freedman. 

“This is how we can supersize our returns,” Freedman said. “They’re helping us find things that customers actually want since they are the customers.”

Venture firms typically raise most of their capital from sources such as institutional investors, endowments and public pensions.

Freedman said Moderne’s team spends time with its corporate limited partners to understand their real estate-related challenges.

“They’re some of the largest owners and operators globally in those sectors. And so when they tell me about some problem, it’s generally indicative that the industry is trying to solve that problem,” Freedman said.

Freedman said the approach is proving especially valuable in helping Moderne decide which artificial-intelligence technology to back. Moderne has ongoing discussions with real-estate companies about how generative AI could improve their business and what technology should be ignored.  

Moderne targets real-estate technology that can be applied in other industries to hedge against swings in the real-estate market affecting startup bets. 

“What I learned in 2008 is that if you just focus on [real-estate sectors], your companies aren’t going to fare well when there’s a downturn and of course these industries always have downturns,” Freedman said.

Moderne began raising its new fund in early 2023 and finished roughly midway through this year. The collapse of Silicon Valley Bank, a slowdown of LP commitments to venture and a paltry exit environment made for a tough and longer than expected fundraising process, Freedman said. 

Moderne previously raised a $200 million fund in 2020.

In addition to strategic LPs, Moderne tapped institutional investors, which Freedman said offer a more reliable commitment to the firm’s funds. Corporations can waver on venture fund commitments for various reasons, including shifting strategy, allocation to research and development, and company performance.  

Moderne’s exits include residential real-estate startup Homesnap, which was acquired by property-data company CoStar Group, and the public offering for Porch, a home service and repair-management company. Porch went public via a special-purpose acquisition company deal in 2020. 

Before founding Moderne in 2015, Freedman launched and managed real estate-focused Second Century Ventures with the sole LP being the National Association of Realtors.

Write to Marc Vartabedian at marc.vartabedian@wsj.com

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Moderne Ventures Raises Second-Largest Women-Led Fund this Year

Moderne Ventures l1as held a final close 011 1nore than $230 1nillion for its third flagship fund, maki11g it the second-largest women-led venture fu11d raised this year.

The Chicago-based firm, fou11ded in 2015 by ma11aging partner Co11sta11ce Freed1nan, has shown significant growth with eacl1 fund. It raised $43 millio11 for its debut vehicle in May 2018, then closed on $200 million for Fund II in August 2021, according to fundraising data fro1n affiliate title Buyouts.

MV Core Fund III began fundraising i11 August 2022 a11d held a first close on $117 million from 74 investors on October 4, 2023, a regulatory filing shows. The fir1n has not filed an updated Form D for Fund III, but it said in a statement that the fu11d held a fi11al close on 1nore tha11 $230 million.

"Notable institutional investors i11clude GCM Grosve11or a11d the Illinois Growtl1 and Innovation Fu11d, and so1ne of the world's largest strategic part11ers like AvalonBay, Essent, and leading real estate co1npanies of the world," Moder11e said i11 the state1nent.

The new fund is the second-largest women-led fund raised this year, according to Venh1re Capital journal research. (See our exclusive list of more than 200 women-led VC funds.) The year's largest fund so far was raised by Engine Ventures, a 1nulti-stage i11vestor targeting compa11ies across deeptech, healtl1care and AI. It closed its third fu11d at $398 million onJu11e 17, above its target of $350 millio11.

Overall, 48 won1en-led funds raised a combined $1.44 billion in the first half of this year, putting them 011 track to raise close to the $3 billion they raised in 2023 and 2022, as VC]previously reported.

REandmore

Moderne backs technology compa11ies i11 real estate, fina11ce, i11sura11ce and sustainability.

The fir1n is led by Freedman, wl10 is listed i11 regulatory filil1gs as the "sole member of the general partner" for Fund ITT, with support fro1n part11er Liza Benson, who joi11ed Moderne as a venture part11er i11 April 2018 a11d was promoted to partner i11 October 2018, according to her Linkedln profile.

Prior to founding Moderne, Freedman lau11ched a11d 1na11aged Second Century Ve11tures i11 partnership with the National Association of Realtors, where she led early investments in and was a board me1nber of companies like DocuSig11, Updater a11d August.

"Moderne's ve11h1re platform, imn1ersion program and 1nassive corporate network co11siste11tly generate synergistic value for our portfolio co1npa11ies a11d industry partners whicl1 leads to top-tier retur11s for our investors," Freed1nan said in the state1nent. "MV Core Fund III is an expa11sion of our existir1g strategy where we apply decades of vertical specialization experience to curate custo1ners for our companies and advance entire industries, producing outsized returns for our investors."

GCM Grosvenor vice-chairman Derek Jones said of the 11ew fund: "011 behalf of our clients, we are thrilled to participate in Moderne's Core Fund III, given the firm's impeccable track record, robust value-add strategy, and strong team. We value the opportunity to back a differe11tiated manager who brings customers to portfolio compa11ies."

Moderne Ventures Raises $230 Million Venture Fund

Constance Freedman has raised a $230 million third fund at Chicago-based venture-capital firm Moderne Ventures.

Freedman is one of a handful of women leading venture funds in Chicago (or anywhere else, for that matter) and one of the earliest. PitchBook estimates women make up the majority of decision-makers at just 11% of venture firms.

Rarer still is raising a third fund. It gets harder to raise each successive fund. Moderne’s first fund in 2015 was $43 million. It raised $200 million in 2021.

Moderne is one of the few relatively recent Chicago-based venture funds over $200 million, including S2G, Valor Siren Ventures, Energize Capital, Jump Capital and Baird Capital. Large pools of capital are critical to a vibrant startup scene, and the number of funds over $200 million has slowly expanded.

Raising money for a venture fund — big or small — has been a tougher sell the past two years. After a reset in venture-backed valuations two years ago, exits, such as IPOs and acquisitions, have been hard to come by. Without returns coming in, it’s hard for all but the most dedicated venture investors to justify putting out more money.

The amount of venture capital raised last year was about half the recent peak set in 2021, according to PitchBook data. It’s on pace to fall further this year.

Freedman, who ran the Second Century venture fund for the National Association of Realtors before setting off to launch her own fund, says Moderne benefits from a strong base of strategic investors such as corporations.

“About 40% of the capital comes from strategic investors,” she says. “But they were harder to get because they’re having their own challenges. Almost all of them came in. Many doubled or tripled down. There's also a bunch of new financial investors.”

Among the new backers are several institutional investors, such as GCM Grosvenor, which are critical to raising larger follow-on funds.

“Constance and her partners have a strong team, a value-add strategy and a great track record,” says Michael Sacks, chairman of GCM Grosvenor.

Freedman has roots in real estate, but she says Moderne has deliberately sought deals with broader appeal.

“We look for companies that are broad, and we use our sector expertise to bring companies into verticals,” says Freedman, who leads the fund with partner Liza Benson. "What you find is any company that is dependent on a cyclical industry, they’re not going to fare well when they experience a downturn."

Moderne recently invested in Qloo, a Chicago-based startup that uses artificial intelligence to help companies understand and predict consumer preferences. Its customers include Starbucks, Netflix and PepsiCo.

“They’ve started to go into real estate and finance, and that’s where we’re helping them,” she says.

Venture-capital deployment is still depressed, down 40% from where it was two years ago, giving an advantage to those willing to invest their cash.

“I am so happy to have dry powder right now because it’s the best investor environment I’ve seen in two decades,” she said.

By John Pletz

John Pletz is a senior reporter covering technology, aviation and cannabis for Crain’s Chicago Business. He joined Crain's in 2007 and previously covered technology for the American-Statesman in Austin, Texas.

Proptech and Fintech Investor Moderne Ventures Raises $230M Fund III

Moderne Ventures, a VC and growth equity firm specializing in proptech, fintech, insurtech and sustainability, raised over $230 million for its Core Fund III.

Why it matters: VCs and LPs are back on the prowl for startup investments, after two slow years of dealmaking.

How it works: Chicago-based Moderne's third core fund will focus on Seed to Series B investments, with a typical first check between $4 million and $8 million.

• The firm plans to make 15 to 20 investments from the new fund, eight to 10 of which will be core deals and the rest smaller, opportunistic seed bets.

• "We are generalist investors with a vertical focus, where those verticals are real estate, finance, insurance and sustainability," managing partner Constance Freedman says.

• "But every deal we do is more generalist of nature, meaning that it has a focus on those verticals but also serves the broader markets."

By the numbers: Moderne has made over 35 investments and backed over 150 Passport companies across its three funds to date.

• Freedman's previous investments include companies like DocuSign, Porch, Homesnap and TaskEasy.

Between the lines: In addition to its venture investments, Moderne runs a six-month program called Moderne Passport to connect companies with a network of about 1,500 executives and corporates.

• "It's a way to bring companies into the industry and connect them with our network, who are all potential customers... and help create value for the portfolio with that business development loop," Freedman says.

Flashback: Before founding Moderne, Freedman launched Second City Ventures in partnership with the National Association of Realtors as its sole LP.

• She spun out Moderne in 2015 with a broader LP base and a $43 million Fund I, then closed a $200 million Fund II in 2021.

Zoom in: The firm's LPs include GCM Grosvenor, the Illinois Growth and Innovation Fund, AvalonBay, Essent, and LeadingRE.

What's next: In addition to the latest core fund, Moderne plans to raise a new growth fund to double down on existing investments and place bets on later-stage companies outside its portfolio.

• "About half of it will go towards the highest growth companies in the existing portfolio... and then 50% of the growth fund capital will be net new deals," Freedman says.